Book review: "How the World Became Rich: the Historical Origins of Economic Growth"

I just finished reading How the World Became Rich: the Historical Origins of Economic Growth.

This book is written by two highly accomplished economic historians. It discusses how the world became prosperous. In general, human progress has been extraordinary. The poorest person on earth today has a better standard of living than the wealthiest people in medieval times. For example, many diseases that killed aristocrats in the past now have treatments. There’s no denying that poverty still needs to be eradicated, and Koyama & Rubin argue that learning from history can offer solutions for making the world even more prosperous.

The book opens with Part One, which contains chapters explaining several factors that are prerequisites for a country to become prosperous. This section is like a synthesis of various similar books you may know, such as those by Acemoglu and Diamond. Several explanations are unpacked, including geography, demography, colonization, institutions, and culture.

The next part covers how these factors combine to explain why the first Industrial Revolution happened in England and nowhere else. According to Koyama & Rubin, it’s crucial to understand why England was first, because the Industrial Revolution is what truly lifted humanity toward sustained economic growth. Many regions and nations experienced golden ages – Rome, the Ottomans, Imperial China – but none achieved what England did. Why didn’t the Industrial Revolution start there? Why England, which was almost always poorer throughout pre-industrial history?

I really love Koyama & Rubin’s storytelling. They avoid convoluted language, making their explanations very accessible. The transitions between chapters flow beautifully, especially in Part Two. After discussing why England, they address why not elsewhere. Then they move to why the rest of Europe followed, then the United States, and finally the Asian Tigers (Japan, South Korea, Hong Kong, Taiwan, and Singapore).

Because the narrative flows so well, I think their book is also very suitable for a general audience. Some of their explanations may be old hat for economists, especially development economists. But even for economists, their synthesis is extremely helpful for framing the factors affecting development, particularly in answering why England came first.

As an Indonesian, my mind naturally connects the book’s content to the Indonesian context. They mention Indonesia once, when discussing the importance of infrastructure and colonialism for economic growth. They cite Dell & Olken (2020) ¹, whose finding is that the areas in Java that are most economically developed today are those that historically served as logistics routes for the sugar industry. This colonial legacy is a key factor in why some regions are wealthier than others. Koyama & Rubin also note that after independence, local elites in such countries tended to continue colonial institutions rather than dismantle them – essentially replacing foreign colonizers with domestic ones.

They also point out that trust among citizens tends to be very low in former colonies where local populations helped the colonizers (as proxy leaders, slave traders, etc.). Yet trust is critical for whether a country can build good democratic institutions.

Yes, in this book, Koyama & Rubin emphasize the importance of having institutions that constrain executive power. Leaders whose power is constrained are less likely to default on debts, so they can borrow at lower interest rates. Constrained leaders also can’t arbitrarily declare wars or suppress innovation (say, because it conflicts with the ruler’s ideology). In other words, developed countries are typically those where, as the saying goes, leaders can’t just do whatever they want.

One reason England got rich, according to the authors, was the parliamentary system of nobles and merchants that constrained royal power. Although parliaments existed in Spain and Portugal too, their ability to check the king and queen was not as effective as in England and the Low Countries (Netherlands, Belgium, Luxembourg).

Beyond constraining rulers, they also emphasize the importance of an educated citizenry. The reason Protestant countries tended to be more successful, they argue, is that Protestant nations helped improve human resources by teaching people to read. The original purpose was to get people to read the Bible, but it turned out to be useful for reading other things as well, enabling faster information dissemination. Protestant-based countries also tended to be more secular.

Oh, and when Koyama & Rubin described Mao Zedong’s thinking about the importance of a centralized economy and price controls, somehow I was reminded of certain leaders in Indonesia recently. Let’s hope the outcomes differ. The Mao era was terrifying.

In short, this book is extremely enjoyable. I highly recommend it because it’s essentially a synthesis of development economics packed into a slim volume (only about 170 pages) that is dense and up-to-date. It’s also very informative with many interesting citations worth following up on. For instance, if you want to dig deeper into the demographic impact on growth, just follow the citations in the demography chapter. The language isn’t complicated, and the narrative flows well. If you’re going to read just one book about how humanity became prosperous, pick this one!

N.B.: Dell & Olken (2020) complements two other articles about Indonesia that I also find fascinating: Kuipers (2022) ² and Bazzi, Koehler-Derrick and Marx (2020) ³. Must-reads if you’re into institutional economics or history.